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Was it constitutional for Proposition 124 to replace PSPRS' permanent benefit increases with a capped 2% COLA?

In this blog I and multiple commenters have broached the subject of the suspect constitutionality of PSPRS' replacement of the old perma...

Wednesday, January 8, 2014

PSPRS lawsuits: Can other states give us an idea how the Arizona Supreme Court will decide?

As we all wait for the Arizona Supreme Court to rule on the Fields case, which is challenging the SB 1609 reforms made to PSPRS' COLA formulation, it might be interesting to see how courts in other states have ruled on the issue.

This article by the Institute for Illinois' Fiscal Sustainbility has a table showing nine states, including Arizona, where lawsuits have challenged changes to state pension COLA's.  While it would be enlightening if there was a clear consensus as to whether COLA changes were legal and constitutional, there unfortunately is not.  Of the nine cases, only Arizona and Washington have had court cases decided in favor of plaintiffs opposing the COLA changes.  Plaintiffs in five states lost their cases when courts ruled that COLA's could be reduced.  Two cases are still pending and have not had any rulings issued yet.  Of the seven that have had a court ruling, three are being appealed in their respective state Supreme Courts and one is being appealed in federal court.

The cases in these different states have no bearing on how the Arizona Supreme Court will rule as each state has its own constitution and is not bound by precedence in any other state.  So while this may not help us read the tea leaves on how the Arizona Supreme Court will rule, there are a couple of points that can be taken away.  It appears that COLA lawsuits based on the violation of standard constitutional principles, such as the contracts, takings, and due process clauses, do not carry much weight.  Only in Washington did a state rule in favor plaintiffs over such standard constitutional principles.  Remember that Arizona has a pension protection clause that is the main point of contention since it expressly states that "public retirement system benefits shall not be diminished or impaired."  I have stated before that I believe retirees who were retired before SB 1609 went into effect have a clear cut case based on the pension protection clause.  However, I also thought that there would have been a quick decision in their favor, so it is anyone's guess as to how they will rule in the Fields case.

Another interesting point deals with the case of Maine.  Their case was heard in federal court and was dismissed because "retirees did not prove a contractual right to COLA's."  This case is being appealed to the 1st U.S. Court of Appeals.  I do not know why this case was heard in a federal rather than a Maine state court, but it shows that federal courts may be no more sympathetic to retirees than state courts have been in lawsuits over standard constitutional principles.  This is important since many pension issues may eventually have to be decided by federal courts.

Stay tuned.

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